Tuesday, April 14, 2009

So…how's Obama doing?

Jack and Suzy Welch recently graded Obama "on how he's doing on critical performance criteria as our country's CEO".

The Welches are generous with Obama and give him an A for leadership, though they may revise this if he fails to champion unpopular but necessary issues. Here is a comment on the four issues the Welches grade Obama on.

Vision and Team-Building

The Welches rightly argue that Obama has the vision “ ‘thing’ without which a person simply cannot lead.” Obama’s vision ranges from the Economy to the Environment passing through Social issues and Foreign Policy.

While an expression of Obama’s cogent vision on Foreign Policy is more recent, we know he has the “vision thing” because Obama is an excellent communicator, both in the technique and the approachability. Not only he has addressed domestic constituencies, he has also succeeded with foreign stakeholders. Quite something.

Next, the Welch’s turn to Obama’s competence in team-building. They give him credit for folding in an egotistic team with high potential for derailment.

The Welches are right. This initial team is a fractious one. Take Larry Summers, for instance. Because he is talented he has been in demanding positions. Yet, wherever he has been he has rubbed people the wrong way, from the World Bank to Harvard.

Perhaps a different question should be asked, are there not equally competent people with a higher team working proclivity that the ones that Obama has chosen? This is not an idle question because it is nurtured in the Obama-tension that surprises us.

It is to America’s credit, besides to Obama’s own, that he became President of the USA. But it still does not cease to surprise us a little. Perhaps it is too soon and it will go away. But perhaps Obama senses this and feels that he needed to put some easily recognizable faces in his team to make it more credible.

Surely Obama could have chosen a lower-key team. Why didn’t he? Because he does not believe they would be as competent, or because they would not be as credible? In which case, we would have to ask, who with does Obama want to communicate?

It could well be that by inviting the abrasive individuals in his administration Obama aimed at dispelling doubts among those who are concerned about his own weaknesses. Whatever the reason, individuals like Larry Summers and Hillary Clinton are a risk to the credibility of Obama’s message of hope bred in solidarity.

Speed and Authenticity

Next, the Welch’s turn to Obama’s “Speed” another fundamental ingredient to an effective CEO.
The challenges were many and the Welches believe that Obama may have initially moved on too many fronts, to the point of distracting attention on the “Big thing” which, no doubt, is the sad state of the economy.

Indeed, we saw some time spent on the ritual of signing-off a bill in support of equal pay for women. That may have been distracting, but it did not take long, and it was necessary. Had Obama not dedicated enough attention to issues like these he would have conveyed the impression that it was business as usual and we all know where that led us.
Authenticity is another issue altogether. There is a hint in the Welch’s analysis that Obama may not come across as authentic as is desirable for a leader, and that; fortunately, his wife makes up for that.

It may well be that it is only a question of perception from the viewpoint of the Welch’s dinner party; but remember Obama’s choice of some abrasive individuals for his team? Negative perceptions add up, and erode a leader’s credibility. It could well be that Obama is not generally perceived as authentic enough and that it is too early to say so bluntly. But it may pile up and then be released on him with the force of an avalanche when he fails the first time, which he will.
The Welches do not mention the word charisma at all in the analysis of Obama as a leader. In a kind response to my comment Suzy Welch later clarified that “Obama's definitely charismatic” and suggested that this perception was implicit in their claim that Obama was a great communicator. Fair enough, but charisma is not the same as authenticity and this begs a different question: How inauthentic may an otherwise excellent communicator be before he is said to be lacking in charisma? I would say very little. If Obama were not perceived as authentic enough, he could hardly be seen as charismatic, despite his eloquence.

We know that charisma is a necessary quality for effectiveness in a leader because charisma awakens the level of affection among the followers which will lead them to forgive, even when the leader fails, as sometimes our Saints do; not because the Saints, or our leaders, are not on our side; but because the strength of the devilish creatures they must contend with may occasionally be just too much for them to succeed.

We do not cease to love our leader, nor our Saints, when they fail us; because we love them we forgive them. Take President Lula for instance. But will people cease to love Obama? No, it is unlikely that they will, because Obama, like Lula, are both Servant leaders. Their style of leadership is anchored in trust and in helping hands rather than in stark competitiveness. That style is unsettling to those in business circles and to them appears to be inauthentic, but it is not.

Comment by Alfredo Behrens
April 7, 2009

Thursday, March 19, 2009

To BRIC or not to BRIC? Is Brazil nurturing the leadership style it takes to innovate?

We have seen a lot on leadership and its impact on performance, but much less on leadership’s impact on innovation; however, the latter is crucial to business competitiveness. One would imagine that a leader cannot be truly effective if his organization’s innovation capabilities are inhibited because of the leader’s style. However, we know little on what leadership style would be most effective to promote innovation in business.

It may help to figure out what type of innovation we are talking about, because business innovation can be incremental or radical. The first improves on what already exists. The last creates something new. Most innovation is incremental. Radical innovations, like television or the sewing machine, are rarer. Still, however radical, an innovation is not such until business can deliver it, and that requires business can make a profit on it.

An incremental innovationMarkides tells us in Fast Second that, for business to deliver an innovation, it takes transforming what may not be much more than a good idea into something that people will want to pay for at a price that business can make a profit on. This is why, Markides argues, that the company that takes a radical innovation to the market is seldom the one that developed the product in the first place. This happens because the company that developed the product frequently lacks the organizational skills that it takes to transform that product from the best possible into an affordable one and to market it and perhaps even support it after sales, Apple’s iPod and iPhone excepted.

That Apple’s leadership is exceptional, though perhaps not more than, say, Virgin’s Branson, suggests that, usually, firms that create radical innovations are led by people different from the ones that lead firms that produce incremental innovations. In the words of Stanford’s James March, a business that delivers incremental innovations chooses to exploits old certainties rather than explore new possibilities.

To explore new possibilities requires business to be comfortable with risk and ambiguities, it calls for an organizational culture that nurtures curiosity, which pays attention to needs and derives pleasure in satisfying wants. Oke et alli suggest that this type of leaders fits best the transformational type, which woo’s followers through charisma and by providing vision and generally making followers feel good about pursuing objectives, like radical innovation.

On the other hand, transactional leaders operate under the “carrot and stick” paradigm, which may seem dull but is operational in making modest things happen consistently, like delivering incremental innovation, which is most of what one appreciates on the shelves of department stores. Perhaps this is why, Markides contends, run of the mill corporations make so much fuss only to deliver marginally different goods.


Yet that is not the whole story. Run of the mill corporations have the knack to transform prototypes into products, brand them and distribute them. Chicopee Mills, a unit of Johnson & Johnson developed the first disposable diaper, Chux, in 1932; but it was Procter&Gamble that spearheaded Pampers in the 1960s by making them cheap and practical enough for everyday use. P&G’s current leader, A.G. Lafley, is generally regarded as exceedingly effective in prodding his team to remain innovative, but it is innovation of the incremental type that P&G delivers.

What about businesses that deliver commodities, which is what most Brazilian big business delivers? There may still be innovation in the processes, though not in the product. Yet we know that the Brazilian leadership style is of the paternalistic kind, in my view, a substantial variation of transformational leadership. If the Brazilian leadership style were transformational we would have filled the basic leadership condition for nurturing innovation, which by and large, Brazilian corporations do not. Embraer is an exception, and it does not produce commodities.

Perhaps it is high time for large Brazilian corporations to enter into the market for products in order to train to focus on innovation. India’s Ratan Tata, with his low cost Nano automibile, has made a wake-up call; so has China’s Yang Yuanqing by turning IBM into Lenovo; and IBM is now bidding for Sun Microsystems. Should a Russian tycoon come up with an innovation Brazil would be left last among the BRICS.

Alfredo Behrens
FIA, International MBA
alfredob@fia.com.br

Read more
  • Constantinos Markides, Paul Geroski. Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets. John Wiley and Sons, 2004.

  • Adegoke Oke, Natasha Munshi and Fred O. Walumba. The Influence of Leadership on Innovation Processes and Activities. Organizational Dynamics. Volume 38, Issue 1, January-March 2009, Pages 64-72.

Wednesday, January 14, 2009

Dear FIA International MBA Candidates,


We are rapidly approaching the start of our 2009 International MBA Class, in just over one month.

I am very pleased to say that we are looking forward to working with a very international, well experienced and diverse group of candidates. Our group is made up of participants from the USA, France, Italy, Brazil, India, Colombia and Peru, and has an average 6 years of work experience. Industry areas represented by the candidates include IT services, oil and gas, marketing, retail, pharmaceuticals, banking and financial services, consulting, food and beverage, and agri-business.

The financial crisis that is affecting world markets is continues to have somewhat less impact on Brazil. Although export markets for commodities are down, currency fluctuations and lower energy prices are reducing the net effect, and internal domestic demand remains important, although slowing. As we saw in a recent workshop at FIA, in late December, with 3 economists and over 70 businessmen and alumni , Brazil’s GDP growth is forecast at 2.5% for 2009, fairly good when compared to -1% for the US and Europe. All in all, an exciting time to start an international MBA program and to study how companies and countries deal with turbulent times!


I look forward to seeing you in February!

Regards,


James Wright

________________


Professor James T. C. Wright, PhD.

Director - International MBA

FIA Business School

Tel 55 11 3732 3520

Website : www.fia.com.br/internationalmba

Monday, December 1, 2008

Crise: Lições a tirar - Mesa redonda com o Prof. James e Convidados

Há muitas lições a tirar desta crise. Algumas dizem respeito à governança corporativa, outras à ética e marcos regulatórios. Todas são importantes, mas quem sabe uma das mais importantes pertença exclusivamente ao âmago do objetivo das escolas de negócios: como ensinar a perceber sinais antecipados da crise para ensinar a agir com convicção sobre informação incompleta e fragmentada e sobre a qual poucos acreditam ate que é tarde demais.

Data: 12/12/2008
Horário: 19h

Local: Unidade Butantã da FIA
Rua José Alves da Cunha Lima, 172 - Rio Pequeno - 2º piso


Inscrições clique aqui
Vagas limitadas - Informações (11) 3818-4021

Thursday, November 27, 2008

Massive losses signal lack of judgment in currency bets

In emerging markets globalization typically means to have your market flooded with foreign products. Yet a few corporations, while still firmly grounded in their home emerging markets, have wet their feet abroad and have learned the hard way.

The large corporations which ventured out of advanced economies first probably have no one left on their staff who still remembers what it felt to be a pioneer venturing abroad. Yet, for an emerging market corporation frequently there are no known precedents, and of course, there are staffing problems to overcome.

One of the most difficult staffing problems became painfully obvious in the last three months, as the American dollar suddenly appreciated, reverting its longer term depreciation. The trend reversion caught most swap operators in emerging markets wrong footed. Swap operators had become used to a deteriorating dollar and seem not to have though twice that, under abnormal circumstances, such as the current financial crunch and its ensuing recession, the price of commodities would fall and the dollar with which they are paid scarcer and dearer.

Yet, in emerging markets currency swap operators continued to bet on the appreciation of their local currencies against the dollar, generating massive losses to their employers.

Brazil’s Aracruz was one of the first to get beaten to the ground. Informed sources claim that it may take Aracruz, the world’s largest producer of pulp from eucalyptus, about a decade to regain its ground. Brazil’s Votarantim’s own paper and pulp operation (VCP) got beaten twice, first as shareholder of Aracruz and then in a bad currency bet of its own, losing about a billion dollars more. Steelmaker Companhia Siderúrgica Nacional (CSN) may have lost $700 million in a sour ADR swap. Poultry farm Sadia fired its CFO, who wasted $415 million, allegedly by indulging on bad currency debts beyond his mandate.

But Brazilian corporations were not alone, Comercial Mexicana, Mexico’s second or third largest retailer, threw the towel after wasting $4 billion on derivatives contracts (see The Economist, October 16). The Mexican tortilla maker Gruma had its trading halted as it disclosed losses amounting to almost $700 million. Asian corporations were not spared either. Citic Pacific, is a Hong Kong-listed conglomerate partly owned by the Chinese government and generated bad currency debt close to $2 billion, (see The Australian, October 22nd). Operators in Latin America, and in China, seem to know how to implement swaps but miss on the direction of the hedge to be made.

Such widespread bad currency debts suggest that there is a swap-training gap in emerging markets. Because the reported losses, so far, have been more frequent and larger, in Latin America, it is possible that the training gap may be larger there. This region is a relative newcomer to globalized operations and swap operators may not be as experienced, or the information sources on which their work depend, not as developed.

Of course, operators are not alone, for instance, they are rewarded on bonuses when they succeed encouraging them to take substantial risks. Their bosses should have known better, but on the other hand, aren’t they all relatively new to the international arena? The size of the losses, painful as they have been, is in itself an opportunity to internationally-oriented business schools in emerging markets, for proper training is obviously lacking.

Alfredo Behrens
Professor of Cross-Cultural Management
FIA International Executive MBA
November 2008

Thursday, October 23, 2008

Crisis and Opportunity

A few weeks ago we were at Vanderbilt University with FIA’s Executive MBA, and a week later, I was in London, participating in the International Accreditation Council of AMBA – Association of MBAs.

These were important times in the current economic crisis; in the U.S., Congress rejected the original Bush administration rescue package on the day we started our classes, and in London, during our meeting with an executive from RBS - Royal Bank of Scotland his company lost over a Billion pounds while we spoke!

Opportunities? Whoever is buying these shares, like Mr. Warren Buffet, is acquiring big companies at low prices. Countries like Brazil, which took more a conservative approach in financial markets, are likely to suffer less damage and will recover faster.

If financial value created by speculative bubbles is lost, concrete positions in productive assets are opportunities for growth. According to "Success Made in Brazil" a book by Donald Sull of Harvard University, Brazilian executives are masters at dealing with volatility. Living for years with volatile rollercoaster markets, they have learnt to hoard liquidity in times of plenty, develop talents and skills in readiness for more favorable times, and to act quickly and decisively when golden opportunities arise.

In personal terms, this is the time to protect ourselves from the storm; to study and to prepare oneself for golden opportunities in companies and businesses that will emerge even stronger from a time of crisis.

James Wright

Crise e Oportunidade

Nas últimas semanas estivemos em Vanderbilt com a turma do MBA Executivo Internacional, e uma semana depois, estive em Londres, participando do Conselho Internacional de Credenciamento da AMBA.

Foram momentos importantes na atual crise econômica; nos EUA, o Congresso Norte Americano recusou a proposta de salvamento inicial do governo Bush no dia que começamos nossas aulas; em Londres, um Conselheiro representando o RBS – Royal Bank of Scotland, agüentou numa reunião durante o qual seu banco perdeu 25% de seu valor na bolsa!

Oportunidades? Quem está comprando estas ações está adquirindo posições em empresas expressivas a preço baixo! Os países e setores que se portaram de maneira mais conservadora estão aptos a atravessarem a crise com menor desgaste e recuperarem suas posições de desenvolvimento mais rapidamente.

Se valores inflados por bolhas especulativas se esvaiam, posições concretas em ativos produtivas são oportunidades de crescimento. Segundo apurou o livro “Sucesso Made in Brazil” de Donald Sull de Harvard, os executivos brasileiros são mestres em lidar com volatilidade; preservam sua liquidez obtida nos momentos de bonança; desenvolvem talentos e competências essenciais quando os mercados são favoráveis; esperam ativamente nos momentos de intempéries, e agem rápida e decididamente quando as oportunidades aparecem.

Em termos pessoais, isto é o momento de resguardar-se das intempéries; estudar (fazer um curso?) e preparar-se para as oportunidades de ouro nas empresas e negócios que sairão da crise fortalecidos.

James Wright